Fiscal Policy

Which of the following policies involves decreasing government purchases and/or increasing taxes?

A contractionary fiscal policy

Which of the following policies involves increasing government purchases and/or decreasing taxes?

An expansionary fiscal policy

The application of fiscal policy to decrease aggregate demand is called a(n) ----- fiscal policy.

Blank 1: contractionary

When income falls, average tax rates fall, which stimulates aggregate demand and ----- unemployment.

Blank 1: decreases, reduces, lowers, cuts, or lessens

As output rises, income tax collections increase, which tends to dampen aggregate ----- and thus help prevent inflation.

Blank 1: demand

When income falls, average tax rates fall, which stimulates aggregate ----- and reduces unemployment.

Blank 1: demand

The application of fiscal policy to increase aggregate demand is called ----- fiscal policy.

Blank 1: expansionary

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called ----- policy.

Blank 1: fiscal

Government ----- policy has limitations that reduce its effectiveness and may even cause the opposite of what was intended.

Blank 1: fiscal

Which is a frequently used tool of fiscal policy?

Changes in government purchases.

This policy involves increasing government purchases and/or decreasing taxes.

Expansionary fiscal policy

Fiscal policy relies on three assumptions: 1.Recognizing the start of a recession. 2.Government quickly determines effective policy. 3.The policy is immediately effective. Which of these assumptions hold in the real world?

None of the assumptions hold in the real world.

Government ----- policy has limitations that reduce its effectiveness and may even cause the opposite of what was intended.

fiscal

One of the most frequently used tools of fiscal policy is changing:

government purchases.

Explicitly raising taxes has the same basic effect on aggregate demand as:

higher tax revenues that result from higher incomes.

As output rises, income tax collections increase, which tends to dampen aggregate demand and thus help prevent ----- .

inflation

In the short run, in order to stimulate aggregate demand and avoid falling output and prices, the government could ----- taxes.

Blank 1: lower, reduce, drop, cut, or decrease

In the short run, in order to stimulate aggregate demand and avoid falling output and prices, the government could reduce ----- .

Blank 1: taxes or tax

Which of the following best describes fiscal policy?

Changes in government purchases and/or taxes designed to achieve full employment and low inflation

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called ----- policy.

fiscal

Changes in government purchases and/or taxes designed to achieve full employment and low inflation is called:

fiscal policy.

Fiscal policy is:

the changes in government purchases and/or taxes designed to achieve full employment and low inflation.